Stored value accounts are being applied to a variety of industries. The most notable are prepaid phone cards and prepaid debit cards. A prepaid debit card can be, for example, an ATM card, a PIN-based card (such as a Maestro card, STAR card or an Interlink Card), or a prepaid MasterCard or prepaid Visa card, which can be used for signature based purchases. The cardholder, usually a consumer, loads value onto their stored value card, and is able to spend that value or take it out at an ATM machine. The “Major Networks”, namely the Visa and MasterCard networks (and to a lesser extent, the American Express, Novus, Discover, JCB, Diners Club, Star, Pulse, and other similar networks), provide an excellent network for the use of credit and debit cards for purchases and ATM withdrawals.
The cardholder can also transfer value from their card to another card which is either owned by them or by another person. This can be used to perform remittances or payments to another person, perhaps at a distant location.
Systems exist for loading value onto prepaid debit cards, as operated by numerous banks, processors and companies in the industry. One common system allows money to be transferred from a consumer's checking or saving account to a prepaid card account via the Automated Clearing House (ACH) network. Another common system allows an employer, through its bank, to deposit payroll via Payroll Direct Deposit, onto the prepaid card. Another system allows people to make a deposit at a Western Union or MoneyGram outlet, and have that money routed to their prepaid card. A less common system allows the cardholder to pay money to a retail merchant, and have that retail merchant route the money to their prepaid card via a web-based interface or a card-swipe terminal. Most of these systems utilize electronic funds transfer technologies offered and operated by various banks (such as Bank of America and CitiBank) and processors (such as First Data, Metavante, and WildCard Systems).
The problem with the system that transfers money from a checking account to a card is that many consumers who seek prepaid cards do not have a checking account. In the case of Payroll Direct Deposit many consumers who seek prepaid cards do not have jobs that offer Payroll Direct Deposit. Regarding the system that utilizes Western Union or MoneyGram, such loads are expensive, and very few card issuers have contracts with Western Union or MoneyGram to perform such loads. The problem with the system that requires a retail merchant to route the money to the prepaid card is that each merchant must be approved by Visa or MasterCard to perform such loads, and in many cases must pay prohibitive fees for this permission.
Prepaid cards on the Visa-Plus ATM network and the MasterCard-Cirrus ATM network have utility for performing foreign remittances. A customer in one country procures, for example, two cards, and sends the second card to a relative or associate in another country. When the customer receives a paycheck or otherwise makes a deposit onto the first card he can then transfer some of those funds to the second card. The relative or associate can then withdraw the transferred funds at an ATM machine in the local currency. The advantage of this method is that the transfer can be instantaneous. However, one problem with this method is that the card-issuing bank and the card association (Visa or MasterCard) make a profit on the foreign exchange, often marking up the exchange rate by 3 to 7%. This is a “hidden fee”, which lessens the amount of the transfer. For example, for a $300 remittance, a 7% markup is equivalent to $21.
Therefore, it would be desirable to provide a means of eliminating or reducing the above problems with the existing Network cards.